Chapter 483
A bank in Inner Mongolia, China, has gone bankrupt.
According to the Deposit Insurance Regulation, the principal and interest up to 500,000 yuan per person are protected, but those who deposited more and the creditors lost their money entirely.
Although the amount of damage was not that large as it was a small local bank that went bankrupt, this brought about a huge aftermath.
Bank failures are an unusual occurrence in China.
This is because whenever a crisis occurred at an individual bank, the central bank, the People's Bank of China, had stepped in to prevent depositor losses through forced mergers and acquisitions. But this time, they took no action and let it go bankrupt.
This meant that the government would no longer step in to rescue insolvent banks. Anxiety spread, and surprised depositors rushed to the banks to withdraw their deposits, and the banks were engulfed in the fear of a bank run.
The Financial Times reported that five more local banks in provinces such as Liaoning and Shandong had gone bankrupt, and that about 20 more were in danger.
As the theory of a Chinese economic crisis grew, the Shanghai Composite Index, which had been rising moderately, began to plummet ahead of the year-end.
It fell 6.5 percent in one day, and then fell an additional 4.63 percent the next day.